There is a culture of distrust surrounding pensions among the self-employed. In fact, the majority would prefer to invest cash in a savings account, c…
There is a culture of distrust surrounding pensions among the self-employed. In fact, the majority would prefer to invest cash in a savings account, cash ISA or property than pay into a private pension, according to new research conducted by Citizens Advice.
A lack of trust, understanding and information are cited as the key reasons by self-employed people that are holding back from saving into a pension. The data was collected from focus groups with self-employed people as well as a survey of 650 people who work for themselves.
The research highlighted that 67 per cent of people don't actually understand the tax breaks offered by cash ISAs and private pensions, with 25 per cent incorrectly believing that an ISA is more beneficial to them than a pension in this respect.
Over a quarter (27 per cent) of self-employed people say they have never received any information or advice about pensions from anyone, which could be the reason for this lack of understanding. In addition, 50 per cent stated that they don't trust private pensions as a safe place to invest their money.
Chris Bryce, IPSE chief executive, commented: "Not having an employer who makes a contribution reduces the incentive to save, and the nature of freelance work means you aren’t always on assignment and can’t commit to setting a regular amount aside for the future.
"If we are to see more freelancers save for the future, then we need to see more and better-quality financial products made available to the self-employed."
Since 2001, self-employment has increased by 32 per cent to over 4.5 million. However, the number of self-employed people paying into a pension has more than halved, dropping from 1.1 million in 2001/02 to just 450,000 people in 2013/14.